The Great California Land Rush
The optimists believe that at last the supply/demand ratio has tipped their way. My late mother, dying from a brain tumor in the bust of the mid-1980s, was desperately trying to keep our money-losing farm. She used to plead with me: “Some day, land will be precious. Please, please don’t sell.” Maybe she was right about “some day,” but much of her efforts went for naught, and the land was sold under duress in the bust, for about one-sixth of what that land is worth now. The owners of my siblings’ land do not live nearby, but they are gracious people who magnanimously allow me to venture beyond my own 45-acre remnant and in the evenings walk the contours of the original farm of my ancestors. But now land is for money, money is for land -- nothing more, nothing less.
4) Another reason for the boomers’ optimism: everything but land and food is bad and almost everywhere but the U.S. things are even worse off. There is no interest on passbook savings. Urban real estate is dicey after 2008. When -- not if -- the soaring stock market dives is the current betting. Land and the profits it provides are seen as good investments. The EU and its agricultural subsidies are in shambles. California’s competitors -- mostly Europe’s Mediterranean agriculture -- are bankrupt. India and China need food for their new yuppies. California agriculture is real: wonderful land, superb weather and climate, innovative farmers, and adequate water -- for now.
5) Most importantly, this boom is said to be profit-based. The others in the past were more inflation- and speculation-driven, as hedges for inflation or brief aberrant commodity price rises. This land rush is supposedly based on bottom-line arithmetic. If almond orchards are high at $25,000 an acre, so are almond profits: 3,700 pounds per acre at $3 dollars a pound leads to a theoretical (everything in farming is theoretical) gross of over $11,000 an acre, and perhaps $7,000-$8,000 an acre net profit -- or a 30% percent return on the investment the first year. (One local just bragged to me he could pay off his land in four years.) In the old days, booming land prices were never justified by such highly spiked commodity prices. I think the fast talkers are drunk who say “buy now at $25,000 an acre before it goes to $40,000.” But then I confess I thought they were inebriated two years ago when they were buying orchard at $12,000 an acre.
I want to be mistaken and believe the boom will only grow, but I have seen too many busts destroy too many lives of my friends and family. Still, whatever the truth, it is fascinating to watch, this mad scramble to make lots of money off the land -- shysters, crooks, the audacious, the capable, the noble, the cynical, they are all out here involved in the way of the forty-niners. The old sandy hill with the half-dead vineyard down the road? No longer is it marginal land that is either poorly planted or sandy. So $6,000 an acre is poured into it -- and, presto, out goes the pathetic vineyard and in comes hybrid almonds on computerized drip lines, overseen by corporate agribusiness experts. Who now cares about its sand, unleveled ground, and bad location? For investment purposes it is now “a California almond orchard” and that is all ye need to know.
Article printed from Works and Days: https://pjmedia.com/victordavishanson
URL to article: https://pjmedia.com/victordavishanson/the-great-california-land-rush